Ecosystems

The media ecosystem is complex, interdependent and threatened

Be sure to check out the first research report we did in partnership with VideoElephant. We surveyed 165 publishers to get a better understanding of the state of their video advertising businesses. Some findings:

• 58% said video is either “important” or “critical” to their strategies

• 46% said video advertising revenue is growing

• Only half of respondents derive more than 10% of their revenue from video advertising

Discover more by downloading the State of Publisher Video Monetization report

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Ecosystems

I’ve come around to the term “media ecosystem” because ecosystems are complex, dynamic and easily thrown out of balance. The features are interconnected and never static. Many factors determine the resilience of ecosystems, notably diversity.

Ecosystems often adapt to external challenges, but they can die when they’re degraded by greed (deforestation, overdevelopment, etc), disease and imbalance. These are the essential challenges facing the media ecosystem at this pivotal moment.

When I think of the many challenges facing the media ecosystem, most of them come down to imbalance, particularly the inability to make the sensible and inevitable tradeoffs that must happen. The fundamental interdependence of ecosystems means that viewing parts of the media ecosystem in silos is unhelpful. There is a connection between the decisions a brand manager makes in Cincinnati and the ongoing demise of the local news industry. 

Ecosystems are not static.Change often comes from external forces, and it is through struggle and competition that ecosystems become resilient. The demise of publications is mourned, but in truth, there is a role in bad businesses going out of business. Clarifying moments can be beneficial in the long run. Adapt and survive.

The media ecosystem faces systemic risk that mostly arise from misalignment. To start to work toward a sustainable media ecosystem, you must start with the media businesses themselves. These businesses face a daunting task of sorting out competing interests of audiences, advertisers and platforms. Time and again, we have seen platforms make decisions in their own interests that have cascading effects on publishers. 

Early in my career, I covered Google in its rise. Any new product release began the same ritual where I’d have all of 15 minutes with a product manager who would kill the clock by starting with a statement that repeated the blog post I already read. It always began with noting that Google needed to balance the needs of users, advertisers and publishers. It didn’t mention Google, weirdly. 

Companies look after their interests first. Game studios are learning this lesson with the business-model changes put in place by Unity, an essential gaming engine. On this week’s People vs Algorithms, Alex explained how Unity pulled the rug out from many small studios. And the details are different, but publishers would be forgiven for replying: Welcome to the club.

Ad models by definition create conflicts with the audience. When advertisers are your customers, they come first. Look at Instacart. It has built a $740 million advertising business that has shifted its business from hopelessly unprofitable to a $8.3 billion market cap. It’s not in the grocery business but the ad business. (Not that it gets a mention in the billionaire CEO’s wistful nostalgia for a childhood in a fishing village.) The shift to ads has made its product worse, without a doubt, as trying to find any product means wading through tons of ads.

And that’s with the best of all ad models: search. It gets harder for those who are reliant on display ads. The ongoing UX crisis threatens to kill the open web part of the media ecosystem. This was once fertile. I fear it will wither under the weight of yield desperation in the name of “ad density.” The end of the quarter is a good time to reflect on the absurd tradeoffs publishers make to lift yield. As Troy says, it “reeks of desperation” because nobody would claim these pages are anything but a terrible user experience. Yet the current state of the ecosystem does not reward publishers for doing “the right thing.”

“We just looked at our digital audience numbers from social and search and it’s significantly down YoY,” one digital media exec told me this week. “We say well at least we know the folks who come to us are seeking us out and thus more engaged but there’s no reward for that ‘engagement’ in a CPM ad sales model.” 

For publishers, this leads to learned helplessness and muttering “it is what it is” repeatedly. The third-party cookie has been in hospice for years, as tech companies jockey to find a hacked solution that will undoubtedly be to their benefit. Publishers are mostly spectators, even if we have learned that substantial changes to the ecosystem nearly always harm publishers more than anyone else.

The reason many obvious issues of quality in the programmatic supply chain go unaddressed is because it isn’t in many people’s interests to do so. Marketers too often turn a blind eye to the scruffier parts of the ecosystem. Agencies profit from it. “Brand safety” – who could be against such a wholesome thing? – becomes another grift and makes original journalism nearly impossible to sustain. These issues don’t come up much at the induction ceremonies for the several CMO halls of fame that hilariously exist. “Make way, CMO coming through!” The media ecosystem is rife with “dysfunctional interdependencies.”

The upcoming antitrust trial of Google will illuminate these dysfunctions. It engaged in the typical sharp-elbowed business tactics the tech industry has long favored to squelch competition while PRing the colorful ball pits, free food and wacky Google doodles. In a previous era, the DoJ took on Microsoft and pierced the veil by showing Bill Gates not as a lovable geek in a garage but as an evasive robber baron in a baggy suite hellbent on crushing competition. 

And that’s what this trial will be about. Peter Thiel said the quiet part of tech out loud when he said, “Competition is for suckers.” Digital markets like search aren’t a winner take most, it’s winner takes all. Google’s deals to lock up distribution weren’t done in parking garages. They were done with press releases. 

Google competitors like Overture would regularly grouse to me in the early 2000s that Google was making it impossible for them to compete by cutting economically irrational deals to power search on places like AOL. As Scott Galloway notes, if Google was winning on the basis of being the best product, why does it need to spend $10 billion to ensure distribution choke points? Now that you mention it, it does seem strange to have one company operate the exchange, be a large seller and also dominate the buy and sell sides. Couldn’t possibly have conflicts in such an arrangement.

Much of the case will either confirm what was already known or elicit a “gambling in Casablanca” from industry veterans. Google never gave guidance because it didn’t have to. Everyone knew they could turn the dials to deliver whatever the shadow number was because they owned the only parking lot in a resort town. These kinds of emails are just confirming what was known.

As Galloway points out, the government is a critical part of ecosystems. Healthy ones need regulation. Self-regulation is the way of the road in the U.S. – something like GDPR would never have originated here – but when markets are out of whack, governments must step in to restore balance.

But to create a sustainable, equitable and resilient media ecosystem defies any quick fix. The digital media industry has continued to peddle that notion. The issues facing it are too complex and interconnected, and they’ll require good-faith efforts by all parts of the ecosystem to think beyond their short-term interests because killing off an ecosystem is not a good option. 

For more on this topic, check out our latest episode of People vs Algorithms, where we discuss the misalignment that is rife throughout the media ecosystem and also within companies. Subscribe to PvA on Apple, Spotify or wherever you get podcasts.

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Thanks for reading. As a reminder, we are kicking off The Rebooting Dinner Series with a series of small gatherings of media executives to foster conversation around how to create a sustainable, equitable and resilient media ecosystem. Submit your information to be prioritized for invitations.